Long-term gain for long-term renters with build to rent scheme

The national obsession with owning our own hope shows no sign of easing up. Could the American multifamily building initiatives provide a realistic alternative to home ownership?

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28 Jan 2016

by Andy Golding

By now no-one should be in any doubt that there has been a seismic shift between the generations in terms of homeownership in the UK over the last decade. The national obsession with owning our home shows no signs of easing up just yet. Yet ever increasing house prices and limited supply are set to keep this out of reach for many. Whilst we wait to see if the government’s housebuilding initiatives bear any fruit, on current predictions housing supply shortages are forecast to exist for at least the next decade. This being the case then it’s realistic to expect a rise in Generation Rent ie people broadly between the ages of 20 and 39, until 2025. 39 is nearly 40, and isn’t quite the picture of the stereotypical first time buyer - young, childless go-getter. There’s more to the first time buyer market than footloose twenty-somethings.

Couples looking to start a family, or upsize to support a burgeoning are one of these. They face the daunting prospect of finding a property that can help them move into the next stage of their family lifecycle. Raising the cash to enable a move from a new starter home to a three-bed semi in a decent area, adequately serviced by a good infrastructure, is not for the faint hearted or the uncommitted. So what do we need to look at here for those looking beyond an 18 month tenancy agreement and keen to put down roots?

One thing we can do is look to our European counterparts who seem to be more ‘au fait’ with the world of long-term renting as a serious alternative to home ownership. In fact Germany and the Netherlands have also embraced the American initiative of ‘multifamily’ which is essentially the ‘build to rent’ scheme already underway in the UK.

Multifamily building initiatives in the States encourage long-lease tenants, which leads to a greater sense of community within an area and improved standards of property maintenance from both tenants and landlords. As these types of properties are rented by a variety of consumers, there is a tendency for the design of these buildings to be more creative and to include extras such as gyms and swimming pools, all with the objective to entice tenants who want to create a home, not simply rent a house. Multifamily investments are proving to be hugely profitable and this sector is offering some of the best returns in their current US real estate market.

That’s great for America but what does this mean for the UK? Property consultancy Knight Frank recently predicted that build to rent will make up over 5% of the private rental sector in as little as four years. That makes sense: we expect to see some cooling down in buy to let in the near term following the increase in stamp duty and changes around tax relief for mortgages, yet we equally know that tenant demand is on the up. People need places to live and if you can’t get a mortgage, renting is the only choice.

We are transforming slowly from being a nation of homeowners to a nation of renters. It feels to me that if we can follow our European and trans-Atlantic allies into the build to rent market, that might well ensure that long term tenants can genuinely achieve the social benefits of home ownership.

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